28 April 1987 Income Tax Severed Letter 5-1609 - [Payments to U.S. Residents from RRIF's]

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

A. Jane (613) 957-2126

April 28, 1987

Dear Sirs:

Re: Payments to U.S. Residents from RRIF's

This is in reply to your letter of May 9, 1986 to Mr. W.G. Pembroke of our Assessing Division which was referred to us for reply. We apologise for the delay in replying.

You noted that the February 1986 Budget proposed to remove the maximum limit on annual payments from a registered retirement income fund (RRIF) effective January 1, 1986. You inquire as to whether a U.S. resident who chooses to receive RRIF payments on a periodic basis in the manner described in the budget proposal will enjoy the 15% rate of Canadian withholding tax applicable to periodic pension benefits pursuant to Article XVIII(2)(a) of the Canada-U.S. Income Tax Convention (1980) (the "Convention"), notwithstanding that the period over which such payments are made is abbreviated to a period shorter than to age 90 of the recipient. You also ask what minimum conditions must prevail in order for the 15% rate to apply.

Now that the budget has been passed, your inquiry concerns the question of whether an amount paid out of an RRIF in excess of the minimum amount as provided for in paragraphs 146.3(1)(b.1) and 146(1)(f) of the Act qualifies as a periodic pension benefit for purposes of the Convention. Determinations of this nature are essentially a question of fact to be made after an examination of all the relevant facts in each case. In addition to examining all the facts this question may require a determination of the intent of the legislators and drafters of the Convention.

With this in mind, and although not free from doubt, it is our view that the words "periodic pension benefit" and "retirement plan" in the Convention actually mean a series of payments made for the purpose of providing the recipient with retirement income throughout the greater part of his retirement years. Consistent with this interpretation, in order for payments out of an RRIF to qualify for the lower withholding rate under Article XVIII(2)(a) of the Convention, in our view the payments must be made as part of a series of payments over the greater part of the remainder of the recipient's life.

We trust this will be of some assistance.

Yours truly,

for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch